The switch to a system of direct cash transfers for subsidies from the New Year could result in savings of at least Rs 20,000 crore in 2013-14 and help better the finances of a cash strapped government, which is also considering a 17 per cent cut in its non-plan expenditure in the next fiscal.
“There is no other option. If we have to contain the fiscal deficit, expenditure must be brought down,” an official familiar with the development said.
Government sources said efforts are on to also shrink the subsidy bill by at least 5 per cent with the transition to direct cash transfers.
Though exact savings are difficult to calculate, sources said that the subsidy bill for 2013-14 may be kept at around Rs 1.78 lakh crore as against the Rs 1,90,015 crore budgeted for the current fiscal.
The government plans to roll out Aadhaar-enabled direct cash transfers of 29 subsidies in 43 districts from January 1, 2013. While initially limited to payments for scholarships, pension and kerosene and LPG, during the course of the next fiscal, it would also include payments for food and fertiliser subsidies.
While from April 1, 2013, direct cash transfers would be started in 18 states, the whole country would be covered by the end of the fiscal.
Meanwhile, efforts are also on to cut down non-plan spends in the coming fiscal. Preliminary discussions on Budget 2013-14, that were initiated by the finance ministry last month, have thrown up a figure of Rs 8 lakh crore for non-plan expenditure next fiscal. This would be lower by 17.4 per cent compared to the Rs 9.69 lakh crore budgeted for this fiscal.
The Vijay Kelkar committee report on government finances had also suggested bringing down the non-plan expenditure through a gradual elimination of all subsidies to help contain the fiscal deficit at 5.2 per cent in the 2012-13.
Partially accepting recommendations of the Kelkar committee, finance minister P Chidambaram has revised the target for fiscal deficit to 5.3 per cent and called for strict austerity measures and cuts in non plan spending by government ministries, starting with the current fiscal.
To ease concerns over the deficit, Chidambaram had recently informed the Rajya Sabha that the government is checking its spends on central subsidies as well as trimming non-plan expenditure by 10 per cent.